Assignment 1 - M1051

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M1051 Q.1. State and explain the factors that affect Management Control? Ans: Management Control is ―The process by which managers influence other members of the organization to implement the organization‘s strategies.‖ The factors that affect Management Control are: Beliefs systems – These systems give direction to the organization control by formulating its mission, strategy and core values. These systems consist of a set of organizational definitions which are formulated, formally communica
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  M1051 1 Q.1. State and explain the factors that affect Management Control?Ans: Management Control is ―The process by which managers influence other members of theorganization to implement the organization‘s strategies.‖  The factors that affect Management Control are: Beliefs systems  –  These systems give direction to the organization control by formulating itsmission, strategy and core values. These systems consist of a set of organizational definitionswhich are formulated, formally communicated and frequently reconfirmed by seniormanagement to provide values, purpose and direction to the organization. Beliefs systems areused to inspire and direct the search for new opportunities. This type of system can be denoted asbehavioural. Boundary systems  –  These systems indicate risks to be avoided and actions whichorganizational members are expected not to take. They provide sets of working arrangements,codes of conduct and rules and procedures. Boundary systems are used to set limits onopportunity-seeking behaviour. This type of system can be denoted as instrumental.  M1051 2 Diagnostic control systems  –  These systems measure and monitor the execution of the missionand strategy with predefined performance indicators. On the basis of the feedback and feedforward information provided by these systems, managers take corrective and preventive actionsto keep the organization on track. These systems also foster the achievement of predefinedtargets by using rewards. Diagnostic control systems are used to motivate, monitor and rewardachievement of specified goals. This type of system can be denoted as both instrumental andbehavioural.Interactive control systems  –  These systems are formal communication systems that managersuse to involve themselves in activities of employees and employees use to communicate bottom-up ideas and initiatives. These systems foster dialogue between the various organizational levels.Interactive control systems are used to stimulate organizational learning and the emergence of new ideas and strategies. This type of system can be denoted as behavioural.  M1051 3 Q.2. What factors influence the success of Management Control System?Ans: The following factors are necessary for the success of a Management Control System: 1.   Responsibility structure, Content, Integrity, Manageability and Alignment For the success of the Management Control System, the organization needs to have aclear and formalized responsibility structure, in which a clear parenting style and cleartasks and responsibilities have been defined. These are then applied consistently at allmanagement levels. The management control system has a content which enableorganizational members to use financial and non-financial performance information. Thisinformation has a strategic focus through the use of critical success factors and keyperformance indicators. The performance information is integer which means it isreliable, timely and consistent. It is also manageable: management reports andmanagement control systems are user-friendly and more detailed performanceinformation is easily accessible through information and communication technologysystems. Finally, other management systems in the organization, such as the humanresources management system, are well aligned with the management control system, sowhat is important to the organization is regularly evaluated and rewarded. 2.   Accountability The effectiveness of the performance management system is also determined by thedegree in which organizational members actually feel responsible for their results andtheir willingness to use the system to obtain performance information which may help toimprove the results. A noncommittal organizational climate is a real threat for the desiredperformance-orientation of an organization. The degree in which one feels responsible isexpressly different from the degree in which one is made responsible. To stimulatefeelings of responsibility, an organization has to take two elements into consideration:relevance of controls and freedom to act. The degree in which organizational membersfeel responsible for their results is connected to the relevance of the performanceindicators which measure their responsibility area. The more relevant these indicators arein the opinion of the organizational members, the stronger the stimulus will be for themto get involved themselves. For example, an operational manager will generally not bestimulated to take action when the results of the overall company are lagging. However,  M1051 4 when it is made clear to him that the lagging results of his own unit are the cause of this,he will be strongly motivated to take responsibility and work on improving the results. Itshows that the defined CSFs and KPIs have to be evaluated regularly on their relevancyfor control purposes by asking the question: Do they still give an accurate picture of the  performance of a manager‘s responsibility area and its link with overall organizational performance? After all, there may have been many internal and external changes sincethe indicators were srcinally formulated and the content of the performance informationmay thus no longer be representative. Taking responsibility for results requires thatorganizational members are given a certain leeway so that they have the opportunity toinfluence their results favourably and the freedom to take action. This implies that peoplehave to be authorized by their managers to take independently and swiftly action onproblems without having to ask permission first. It also asks for involvement of organizational members in defining the right KPIs for their responsibility areas. 3.   Management Style A manager with an effective style is able to explicitly steer on results whilesimultaneously giving support to employees to help them in obtaining the desired results.Steering entails making clear agreements, monitoring, discussing progress issues andcalling upon the own responsibility of employees. Support asks for a coaching management style which is aimed at enlarging people‘s insight into their possibilities for  influencing their own results and at stimulating their feelings of responsibility. When themanagement style is restricted to only steering, a directive style without much regard forthe importance of individual responsibility will be the result. However, when themanagement style is limited to only supporting and coaching, decreased commitment anddisorientation will be the result. The combination of result-oriented steering and coaching equals the style of ‗result - oriented coaching‘. To stimulate this man agement style, anorganization has to take three elements into consideration: visible commitment, clearsteering and support. Visible commitment entails that management uses the performancemanagement system in such a way that it is clear and visible to the other members of theorganization. To focus the attention of organizational members maximally on the desiredperformance, forceful steering by management is necessary. Forceful steering ischaracterized by setting clear goals, drafting clear improvement plans, monitoring
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